Venture capital anatomy
The National Reconstruction Fund (NRF) offers a significant opportunity for businesses seeking venture capital investment. Venture capital involves exchanging ownership in your company for funding and access to markets. This is very different to a grant.
While this can provide the financial boost needed for growth, it’s good to understand the implications. Unlike traditional loans, venture capital requires you to share your company’s success with investors, in this case the Federal Government. This means sharing profits and decision-making, which can impact the direction and control you have over your business.
Seeking socio economic benefits
Another factor to consider is that this is not traditional venture capital investment by private equity, it’s the Federal Government investing in your business. This adds the ‘socio economic’ benefit the government is seeking when investing in an organisation. Does your project offer a benefit to the community be it through IP, jobs, export, economy and so forth? For organisations seeking to expand into markets the Government operate in, this type of funding may be a real advantage.
Am I even eligible?
Another consideration when applying is eligibility. Check out the ‘who can apply’ section of the NRF to ensure your organisational structure is eligible here.
Then you need to ensure project alignment with the NRF’s focus, which includes seven key areas of investment such as renewable energy, healthcare, and advanced manufacturing. See our previous article about this. Ensuring eligibility is a key step towards taking the next step and submitting an expression of interest. Proposals must be solely or mainly based in Australia and are not prohibited investments.
NRF application process
Once you’re prepared, the application process begins with an Expression of Interest (EOI), which is a quick initial step. However, if selected further stages of the process can take significantly longer, requiring your business to be investment-ready, including having a solid business plan, market position, financials, and the capacity to scale. It’s crucial to be fully prepared for the commitment and resources needed for the application process and to have a team capable of executing the project.
Get the team together
This is not a solo project! You will need to involve your accountant and/or financial advisor amongst a team of other experts to decide if this is a worthwhile investment in time and money. A company that has experience seeing venture capital and has their documentation ready will still be looking at spending around 80+ hours submitting an application. If starting from scratch, a company will be looking at roughly spending 150- 200+ hours in total submitting an application. A business needs to decide if they can afford to invest these resources when there’s a chance that your may not be chosen as an investment partner.
It’s competitive
The NRF is offering a level of investment that Australia hasn’t seen before and is need of, given the softness of the venture capital market currently. This means it will be a highly competitive program with many experienced and not so experienced companies applying. You can also expect to be competing with many VCs that will be looking to leverage their investments into companies.
The benefits and risks
So should you apply? Deciding whether to apply for the NRF involves careful consideration of your business’s goals, needs, and readiness for venture capital investment. Check in with your team, including your accountant and financial advisers to help you decide.
Venture capital investment can bring significant benefits to your business beyond just financial support. It can provide access to valuable networks, industry expertise, and mentorship, which can help accelerate your growth and success. However, it’s important to remember that venture capital is not a one-size-fits-all solution. It’s crucial to assess your business’s specific needs and goals to determine if venture capital is the right path for you. Aspects of the program are still emerging, so staying updated with the latest information is key.